TrafficSchool v. Edriver: reasonable to presume that every
dollar D makes came from P’s pocket in a comparative ad context.Weight of case law: rebuttable presumption of
causation and injury for willful literal falsity in a two-firm market for
comparative statements. Second circuit: noncomparative ad but two party market,
court allowed presumed damages. Showing injury is separate from showing
damages, but you do see presumptions of injury for injunctive relief
purposes—has to be considered separately, but some courts mix it up.

Damages calculation should be fair and reasonable
approximation of lost profits, SDNY. Wrongdoer bears the risk of error, DC
Circuit. P proved damages by showing own internal projections of sales in the DC
Alpo case. Disgorgement: 2d Circuit requires willfulness. 9th
Circuit does a totality of circumstances analysis; willfulness not required
where disgorgement is proxy for P’s lost profits and where parties are direct
competitors; it is required if the theory of recovery is unjust
enrichment/deterrence.1st:
willfulness not required to get profits from direct competitor; it is from
indirect competitor. 3d and 7th: willfulness is only one factor to
be considered; disgorgement still available w/out it.

2d Circuit considers: degree of certainty that D benefited
from the false advertising; availablilty and adequacy of other remedies; role
of D in effectuating wrongdoing; P’s laches/unreasonable delay; P’s unclean
hands. 3d: intent to confuse; sales diversion; adequacy of other remedies;
unreasonable delay by P; public interest in making misconduct unprofitable.

Lanham Act allows treble damages, for any sum above the
amount found as actual damages not exceeding three times; but enhanced damages
must constitute compensation, not a penalty. But: Merck case: enhanced damages
can serve compensatory purposes when harm difficult to quantify and deterrent
purposes when violation was willful.Where appropriate?D received
intangible benefits from advertising. P’s relative market loss isn’t accounted
for under lost profits; D’s profits allowed it to gain market foothold; P’s
lost profits don’t fully capture D’s profits.

Chances of getting attorneys’ fee award overturned on appeal
are not good.Some require malice/bad
faith for “exceptional” cases; other circuits allow award based on objective
de/merits without showing bad faith.

Julia Reytblat, Associate General Counsel, Church &
Dwight Co., Inc.

Inside look at damage: What are lost sales/damages?How long has the ad been running?What sales/market share can be
quantified?Royalty loss?Brand damage?D’s hat: quite different—point out to court that lost sales may have
resulted from a whole slew of factors, not the result of false
advertising.Launches of product by P
may have cannibalized sales; other competitive launches may have affected whole
industry; quality issues with P’s product; has P changed its ad strategy?Has it spent less on ads?Are the products seasonal at all?

Start thinking about docs and witnesses early in the
case.Plaintiff may want Nielsen/network
data; frequency of bad ads; competitive price tracking; sales figures. Be aware
of what’s in your client’s files.Witnesses: finance people: were we offering any discounts etc. that
might affect sales?; marketing research: can testify to impact on purchase
intent; sales: can give front line perspective—are we losing shelf space?Outside expert may sound more persuasive.Plaintiff may want sales/marketing expert
demonstrating products are competitive, explaining impact of advertising,
arguing that the falsity drove sales, connecting D’s ads to P’s drop in sales.

Defendant might consider market response model/regression
model. This identifies performance drivers through regression. It’s expensive;
requires expert with PhD in marketing/finance. Estimates importance of each
factor and controls for non-advertising factors that could affect sales; allows
isolation of variables.Expensive, but
may be worth it if damages exposure is large.(P can use too.)

For disgorgement, P’s burden is quite low: D’s sales only.
Every $ must be shown not to be the result of false advertising.Show production, distribution, indirect
costs—physical plant, energy costs.D
must be ready to allocate costs, produce supporting documents—can even deduct
marketing cost of the false ads.

Q: have you seen arguments about sales not attributable to
ads?

Reytblat: yes, definitely. Some products’ brand is so strong
that people will buy regardless of ad content, repeat/loyal buyers, price. Some
categories are very price sensitive.

Q: role of jury?

Kaplan: Expert can be good at persuading jurors of
effects.Disgorgement is an equitable
remedy so no jury right, though a court could give it to a jury for an advisory
opinion/advice on the $ if the court decides disgorgement is appropriate.

Q: counter-advertising costs?

Kaplan: rectifying the false ad need not be the only purpose
of counter-advertising, according to one court, so you can recover your
counter-advertising costs as damages if rectifying the falsity is one of the
main purposes.

Q: should P be forced to spend any award for
counter-advertising on
counter-advertising?

Kaplan: has only seen it awarded for past corrective expenses.D should maybe pay for the future
counter-advertising itself.(But see the
ISO
case from D. Mass, which indicates the risks of awarding P the $ but upholds
a smallish award for that purpose.)

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